A look back at the year 2013 in property – Michael Matusik

Another year has flown by for those of us interested in property.

This post we take a few minutes to review what happened & what we said…

January – Rental Market

Just under 30% of Australia’s renters – 645,000 households – live alone.  The next largest rental group with a 23% market share or 520,000 rental households are childless couples or couples whose children have flown the coup (lucky buggers!).  And 200,000 renters live in what the ABS call “group households”.  Yet, two out of five households are families with children living at home, with half of them being single-parent homes.  Revisit the full article here.

February – Housing Affordability

When you factor in the increase in housing size and improved quality of our housing stock against end prices, housing affordability has improved dramatically in Australia.  The similar argument applies to downtown apartments, which more often than not, are in places which are increasingly attractive to live in. In short, the increase in density (and price points) is substantially offset by the quality of neighbourhood.  Value for money is a much more relevant measure here than just the end price.  Revisit here.

February – Supply v Demand

The new supply/demand equation has shifted dramatically across Australia over the past twelve months.  The country is now approaching an under build situation – with 32,000 too few dwellings, we estimate, being actually commenced last year.  Australia’s rate of population growth rose from 259,000 during 2010/11 to 360,000 during financial 2012 – a 40% lift.  This has helped underlying demand catch up with new dwelling supply.   Revisit here.

March – Why Does Property Cycle?

There are five phases of the property cycle – trough, upswing, peak, downturn & recovery.  There have been ten cycles in Australia since reliable records started.  They have averaged eight years in length from trough to trough or peak to peak.  There have usually been five years of improving market conditions – historically end values rose 11% per annum.  There are also periods of decline, averaging three years in duration, where values – in the past – have fallen, on average, by 5% for each of the three downturn years.  Overall, Australian residential property owners have – again in the past – enjoyed annual capital gains of 8.5% per annum when property is held for a whole cycle.  Revisit here.

April – China

Likewise, America, and in particular with the increasing use of their own shale oil & coal seam gas, will internalise their production.  They, too, will become more insular.  The result will be the same for China.  China cannot keep its economy expanding at its current pace.  History shows us that rapid economic growth in an export-orientated economy requires upwardly mobile domestic customers.  It is nice to see pictures of new Chinese cities; the Chinese nouveau-riche & more Chinese tourists, but the vast majority of the Chinese population is impoverished.  China, despite trying many times, needs to revolutionise its interior.  Revisit here.

May – Walk Score

Walk Score’s measure of walkability captures not just the benefits associated with walking, but with greater accessibility generally.  For example, places with higher Walk Scores tend to have more mixed uses & better transit services, and much of the value measured here may be attributable to those assets.  Our study across 24 Brisbane suburbs found that places with higher walkability achieved higher prices; grew faster in value; attracted higher rents (& rental returns); had fewer vacancies & less properties listed for resale.   Resale listings also sell faster in high Walk Score areas.  Revisit here.

June – Sales Risk

The biggest issue facing new residential is sales (i.e. settlement) risk.  At this stage of the cycle (recovery), low valuations, plus negativity from ‘gate-keepers’ such as solicitors & relatives/friends, are stopping sales.  I know of several new apartment projects – all very well priced & with great financial returns; some actually built – in which, for whatever personal reasoning, a potential buyer’s solicitor has advised against the purchase.  When challenged about such ‘advice’, the solicitors in question, more often than not, refuse point-blank to discuss the issue.  Revisit here.

July – Population Growth

Did you know that Australia’s population has increased by 30 per cent in just 20 years?  We have added the equivalent of Sydney’s population since the early 1990s.  Queensland’s population has increased by 50 per cent; Western Australia’s & the Northern Territory’s by about 40 per cent.  Half of the growth over this period came from natural increase.  Big Australia?  Well maybe not.  But sadly there is no conversation, not a pip, regardless of federal political party, about population targets, urban matters & regional planning.  Serious policies (not politics) about such matters are long overdue.  Revisit here.

August – Game On!

It astonishes me that we still keep on reading about Australia’s pending housing market crash.  Moody’s is the latest commentator to join the chorus singing for caution on the Australian residential market.  Sadly, most overseas commentators don’t understand the nuances of the Australian property cycle or how mortgages are granted & must be repaid in Australia. Yet despite forecasting absolute doom about five years ago, our ‘property correction’ actually went sideways since the late 2000s.  And now the residential market is set to recover.  I am quite bullish about the outlook for east coast residential property & in particular in Sydney, Melbourne & South East Queensland.  Revisit here.

September – Unaffordable?

Average Australian household assets totalled $858,000 last year, whilst total liabilities averaged just $130,000.  The value of the family home accounts for around 40 per cent of net worth.  Superannuation & investment property tie for second place with 15 per cent each.  The average outstanding home loan was $74,700 in 2011/12, with investment property loans averaging just $42,100.  So we are very well off.  Revisit here.

October – Gone

For those interested in property matters, over the next 24 hours you will be bombarded by tales of woe about all those poor first timers who cannot get into the market.  Nasty investors.  Rich Baby Boomers.  Property bubble.  The need for more grants.  Chinese buyers.  Overseas migrants.  FIRB.  Poor town planning.  Capital Gains Tax.  They lack confidence (now thats a laugh!).  The blame game will go on and on.  According to the latest official figures released today – well for August – first home buyers (FHBs) accounted for 13.7 per cent (always best to get the decimal point in) of all loans – a 9-year low.  The long term average is about 20 per cent.  Why?  Revisit here.

November – House Prices

After going nowhere for about two years, house prices have lifted for five consecutive months.  The lift is also widespread with most major markets showing annual gains.  According to RPData, home values across our capital cities are up 8% on a year ago – with detached house values rising by 8.2% (yes a decimal place) & attached property up 5.9% (and oh, what fun a single dot can be!).  The average house price in a capital city is $540,000 & the typical apartment costs $460,000.  Revisit here.

November – Great News

Buying a property or car in Queensland just got whole lot easier thanks to new laws introduced in Parliament last week by the Newman Government.

An overhaul of the Property Agents and Motor Dealers Act (PAMDA) has seen (amongst many things) the removal of Form 27c; agent’s commissions being deregulated & the sole/exclusive agency period extended.  All great news.  Revisit here.

PS The Missives selected were the most read & shared each month.

…..

It’s the first poll of the year….and one of our most telling.  Market Outlook 2014 asks your opinion on what’s going to happen in property throughout the year.  Get in early; give us your two bob’s worth and we’ll report back to you with ours – in February.

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Michael Matusik

About

Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive


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